You Probably Don’t Need the Blockchain, but You Might Need an ICO

Many modern projects are desperately trying to shove blockchain terminology and technology into contexts where it makes little to no sense. With good reason – Long Island Ice Tea, a company which dealt exclusively with non-alcoholic beverages up until December 2017, renamed itself into Long Island Blockchain, claiming a refocus on blockchain-based investments. This move made their stock price jump a whopping 290%.

Not soon after that, the price went down dramatically and the company ended up performing a Pump and Dump on itself. Kodak met a similar fate – they intended to launch their own Kodakcoin and even get into production of ASIC machines.

These companies set their own expectations of themselves too high and pushed blockchain into areas where it doesn’t make sense, purely for marketing reasons. Any companies with a similarly undefined idea will likely meet the same end. So, how is one supposed to market a new product? How does one avoid this fate?

Trained by experience on several of our own blockchain projects and multiple launched ICOs, we think the way to succeed with an ICO project long term is by taking only one of the following two paths.

All-in

The first option is finding the proper niche and focusing on solving a problem with the only technology that offers a viable solution: the blockchain.

If the infrastructure requires a blockchain – not can benefit from it but requires – then it’s a good idea to go all in and market the project as blockchain-based.

An application for permanent registration of real estate ownership? The blockchain is absolutely necessary and useful because its permanence, immutability and transparency all give the project extremely important attributes.

An application for scanning multimedia formats and finding out what’s on screen? The blockchain is absolutely not necessary and can even harm it from an operational costs perspective.

Projects with an all-in approach must identify true usefulness of the blockchain, and that’s going to be one or more of the following attributes:

transparency: if it’s necessary to let third parties and independent observers check the truthiness of a claim. An example is the real estate notary mentioned above where checking a parcel for ownership is essential during sales.

immutability: if it’s necessary to keep the data indefinitely and that it’s easy to restore after catastrophic failure regardless of the intensity of the attack. As an example we can list criminal records or university diploma registries.

globalization: if it’s necessary for the application to be able to accept payments from all over the world regardless of the status of the banking system in that world. Example: third world countries which skipped landlines and moved straight onto cell phones with data service.

automation / trust: if it’s necessary to transfer value or assets without an intermediary and after a certain trigger (time based or condition based). Example: a trust which releases money after an elapsed period.

financial freedom: Americans often defend their right to bear arms by quoting the Second Amendment which states that it’s necessary to stay armed for the purpose of defending against a tyrannical government. It’s interesting to see most of them completely reject this concept when money is concerned. No matter how many guns are in a home, when banks freeze your accounts you can be sure the gun owners will turn on each other sooner than they’ll go into full out battle with the government. The blockchain allows individuals to exit an openly corrupt Federal Reserve system.

Combinations of the attributes listed above are possible and desirable as they further solidify the need for blockchain technology in a project. Let’s take Kleros for example. Kleros is a decentralized dispute resolution project. If a client and provider disagree on an outcome of an engagement, they can start a dispute on the blockchain where, using a smart contract, independent parties vote on who’s in the right. By sacrificing part of their tokens to cast this vote and thereby buying a chance to win more tokens back, bystanders help the system reach valid and unbiased decisions about refunds or about closing the dispute. Without a decentralized blockchain, this would not be possible.

All-out

The second path, and ultimately the one most projects should take, is being transparent about the fact that they don’t need the blockchain but like the ICO fundraising method.

A project which technically doesn’t need the blockchain can still be extremely successful in its fundraising round if it presents itself as such: “We don’t really need the blockchain, but we want to make it possible for the maximum number of people to invest in our project while retaining 100% of the creative control”.

An application which is the AirBnb of home cooking doesn’t need a blockchain from a technical perspective. If Uber and Airbnb can work without the blockchain, so can CookUp. Of course, global reach of payment methods and automatic charity fee deductions are a useful feature of the blockchain, but in no way essential here.

However, if a project wants to collect enough funds for several years of runway (the period during which it is not necessary to turn a profit) without selling a big part of the company to “angel investors” in advance, an ICO is an excellent option.

If a startup is dealing with home cooking, I don’t see why it wouldn’t let “mere mortals” invest their savings into the project. If we’re allowed to gamble away our money or spend it on vices, why not on investments?

Conclusion

While most projects can find some excuse to shove blockchain into the infrastructure, the truth of the matter is that it’s simply not necessary most of the time. All-in and All-out methods are the most common advice we give projects when hired on consultancy gigs, and it is a matter of fact that most of the time we advise people against using the blockchain. This doesn’t mean that a project which doesn’t need the blockchain and still advertises as if it does won’t succeed financially – this short term ICO success is not uncommon in the crypto space as you might know. But this effectively makes the project shoot itself in the foot and kills or slows down further development as the team desperately flails to work around the downsides of the blockchain while forcing it into their project.

When planning a project, remain objective, realistic, and humble. Consult blockchain experts before you decide to implement it and only once you’ve crystallized the idea start pushing it into the general public.

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Bruno has a Master's Degree in English Language and Literature and Computer Science, and has been in web development and publishing for over a decade. He's been in the blockchain space since 2015. He's an avid board gamer and VR enthusiast - find him on Oculus and Steam as TheSwader. He frequently rants on Twitter.